Friday, December 27, 2013

On This Day In 1944 Government Seizes Store Giant Montgomery Ward

On this day in 1944, the federal government seizes Montgomery Ward, acting on President Franklin Delano Roosevelt's orders. It was the second time that the government seized the company during 1944.

The use of federal power was brazen, to say the least! But FDR had spent his entire presidency expanding the scope of federal power, to the country’s detriment. Perhaps his audacity wasn’t so surprising after all.

During the war... years, FDR reinstituted a WWI-era War Labor Board. The board was supposed to arbitrate labor disputes and prevent slowdowns in the production of materials needed for the war. The goal was to keep union strikes from affecting the war effort.

At Montgomery Ward, none of this went over so well. During the Great Depression, the retailer had struggled to keep up with competitors such as Sears. In order to save his company, CEO Sewell Avery took many cost-cutting actions: He saved the company financially, but his actions also led to a series of disputes with the company’s workers. By April 1944, the company’s labor agreements were expiring, which meant the workers could again go on strike. FDR ordered Avery to sign a new contract or to have his company seized. Avery refused, and he was carried out of his company, feet first, by soldiers. (See attached picture.)

The company was returned to Avery’s control in early May, but Avery still refused to accept the Union contract. Matters simmered again for a while, then came to a head in December when Montgomery Ward’s workers went on strike. On December 27, FDR again ordered seizure of the retailer. He told the country: “The Government of the United States cannot and will not tolerate any interference with war production in this critical hour.”

The second time around, Avery was not carried out of the building. He stayed in his office while Major General Joseph Byron used an office nearby. It would be nearly a year before the government would relinquish control of the company back to Avery.

The retail giant was never the same again, partly because Avery became so suspicious of the government that he sat on hordes of cash. Other retailers, such as Sears, were investing in their companies and growing. Avery was not. The free market, finally back at work again, did not reward Avery’s decision. Eventually, as we all know, Montgomery Ward could not stay afloat, and it went out of business in 2000.